OANDA, one of the first brokerages in the world to target retail clients, is opening a new page in its history. The company’s US subsidiary is starting a raw spreads offering for its clients in the United States.
Commissions on the offering are set at $50 per million traded. There is also a minimum deposit requirement that is at present set at $10,000. The company’s decision is an obvious response to the deal that GAIN Capital signed with FXCM.
OANDA states that the minimum spread on the EUR/USD pair starts from 0.1 pips, reaching up to 0.4 pips in a typical market environment.
The company has included 70 FX pairs in its offering, including some exotics like the Turkish lira, South African rand, Eastern European currencies and Chinese yuan.
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FXCM’s Exit Results in More Competition in the US
Paradoxically, the forced exit of FXCM from the US market after its violation of CFTC and NFA rules is resulting in a better offering for retail clients in the US. OANDA is stepping up its game after years of committing solely to a market making model. The acquisition of GAIN Capital of the clients of FXCM is a material development that surely played a major role in OANDA taking this decision.
The introduction of a competitive offering with raw spreads may push GAIN Capital to respond with one of its own. Considering that the minimum deposit is $10,000, the Core Spreads product will be limited to higher net worth clients, but the end result is that US citizens will have a credible alternative to market making.
OANDA has been on the market since the ’90s and is one of the first companies to democratize foreign exchange trading with conservative leverage since the beginning. Proper risk-management will be key to the success of OANDA with this product. As the Swiss National Bank black swan event showed, brokers that offer raw spreads are facing substantial risks.
Head to head competition between GAIN Capital and OANDA is so far proving to be a very positive development for US clients.